Source : Courtesy of IRDA

IRDA (Non-Linked Insurance Products)

Regulations, 2013

• IRDA, vide its Notification dated 16.02.2013 has

released the latest regulations on the product

structure of non-linked Insurance Policies (popularity

called “Conventional” policies with in LIC)

• These regulations are likely to have a far-reaching

Impact on the way conventional policies are structured

and sold by Insurers, Including the market leader LIC.

• Around three years back, IRDA’s guidelines on the

structure of Unit Linked Insurance policies had a crucial

Impact on the business of the Insurers

Individual Insurance

What is the Immediate Impact?As per new regulations.

• The Insurance Companies have to immediately examine whether all

existing products are in conformity with the new regulations.

• In case of individual products which are non-compliant, Insurers have

to make necessary modifications to these products and file the

modified file and use before 30.09.2013 for IRDA’s approval.

• All Individual products not in conformity with the provisions of the

new regulations shall be withdrawn from 1st October, 2013.

• All policies issued prior to 16.02.2013 will continue with out any

changes.

• All Policies sold during the transition period will have an option to

switch over to the modified version, if any once introduced.

• Similar kind of regulations are set for Group Insurance Policies.

What is store for Conventional Products

IRDA has mandated new rules for:

• Product Structure

• Minimum Insurance Cover

• Additional Benefits / features

• Policy term, Premium Paying Term, Commission

• Surrender Value

• Advance Premium, Level Premiums, Splitting of policies, Financial Viability of the products

• Benefit Disclosure

• Fund Management in respect of with-profit policies, market value adjustments

• Variable Insurance Products and non-linked pension plans

Proposed changes in a nutshell

Plans like Bima Nivesh

2005, Short term

Endowment, Jeevan

Tarang, Jeevan Anand

etc. to be withdrawn/

modified.

All plans need revamp.

Single Primium:

Min. 125% SP (for age upto 45 yrs)

110% SP for others.

Non-Single Premium :

Min. 10 times Annualised Premium (for

age up to 45 yrs.)

7 times Annualised Premium for others

Suicide Clause:

Suicide with in 1 year, 80% of Premium

paid or Surrender Value Payable

Fraud : Policy Cancelled by paying SV

Minimum Death Benefit

With-profit plans with

Loyalty Addition liken

Jeevan Saral, New Bima

Gold, Bima Bachat etc.

to be withdrawn.

2 Types:

Par & Non-par Products

(with-profit & without-profit)

For Par products: Bonus only on Annual

Basis + Interim Bonus + Final Addl Bonus.

Product Structure

Probable ImpactIRDA MandateChanges in

Proposed Changes in a nutshell (Contd. . . )

All Products may

revamp

PPT 10 years or More:

Guaranteed Surrender Value (GSV)

acquires after premiums paid for 3 years

PPT Less than 10 years:

Guaranteed Surrender Value (GSV)

acquires after premiums paid for 2 years

Single Premium:

acquires immediately ( 70% with in 3rd

policy anniversary increases thereafter )

Surrender Value

Plans like Jeevan Shree-

I, Jeevan Pramukh,

Jeevan Amrit etc. to be

Minimum Premium Paying Term for

other than Single Premium Policies will

be more than 5 yearsPremium Paying Term

NILMinimum Policy Term will be 5 yearsPolicy Term



5%7.5%35%12 or more*

5%7.5%33%11

5%7.5%30%10

5%7.5%27%9

5%7.5%24%8

5%7.5%21%7

5%7.5%18%6

7.5%

-

2nd & 3rd

Years

15%

2%

1st Year

Commission / Remuneration in form

25 % Premium

5%

-

Subsequent

Years

5 Commission

Structure of

Money Back

type policies

need revamp.

Over all, no

decrease in the

benefits to

agents

Single

RemarksPremium

Paying Term

Commission Structure (Other than Pension Products)

*For new Insurance Cos. Max. Final year Commission can be 40% in first 10

years of their operation for PPT 12 or more


2%

-

2nd & 3rd

Years

7.5%

2%

1st Year

Commission / Remuneration in form

25 % Premium

2%

-

Subsequent

Yeasr

Other than

Single

Premium

No decrease in

the benefits to

agents

Single

RemarksPremium

Paying Term

Commission Structure ( Pension Products)


All Products may need

to be revamped.

Plan like Jeevan Amrit

to be withdrawn.

1. Advance Premium not allowed ( max.

allowed 30 days prior to due date)

2. Premiums will be level all through

out the term of the policy.

3. Service Tax to be collected from

policyholder separately over and

above the actual premium rate

4. Multiple policies of the same nature

(splitting of policies) not allowed.

5. Misleading name of products not

allowed

Miscellaneous

Provisions

Bima Account I & II may

need revamp Various Conditions are proposed

Variable Insurance

Products

No major changes in

New Jeevan Nidhi

expected since it look

Various Conditions are proposedPension Products



All Products will have to

be modified.

6. Financial viability of each product to

be reviewed every year. Every

product to be re-filed with IRDA

Every 5 years.

7. Benefit illustration to be signed by

both party & Agent. (Return

assumptions currently to be 4% to

8%)

8. Some other restrictions imposed on

with-profit fund management,

market value management etc.

Miscellaneous

Provisions


Quick re-cap on possible changes

• All most all our Conventional Products have to be withdrawn on 30.09.2013.

• LIC will have to file new products for IRDA’s approval afresh.

• After 01.10.2013, Service Tax under all products will have to be borne by customer

• There will not be any decrease in the commission structure of agents

In addition to the above IRDA has notified for standard Proposal form for

life Insurance. .

IRDA (Standard Proposal Form for Life Insurance)

• From August 2013 onwards, a standardised

proposal form as mandated by IRDA has to be

used for new proposals.

• Proposal forms need necessarily to be filled

up by Customers only.

• The proposal form will be with 4 different

sections with detailed information, both

personal and financial, sought

Conclusion• This Presentation is prepared with a view to

share the information on the possible course of events in the current Financial Year.

• Field Force needs to get sensitized about the possible fall-out of the new regulations and should prepare immediately to face the new challenges

• Understand the strength of our products & plunge into the market . . .right away!

Source : Courtesy of IRDA -...

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